Speaking at Kroger’s 2022 business update on Friday March 4, chief merchandising and marketing officer Stuart W. Aitken noted that the Home Chef brand, which Kroger acquired in 2018 for $200m, became a billion-dollar brand in 2021, adding: “We will continue to expand this brand across our family of companies.
"Our assortment is connecting with the customer through ready-to-eat meals, rotating seasonal programs, new appetizers, as well as our first plant-based protein in partnership with Custom Made Meals and Impossible [Foods].”
Neither party has commented on the scope of the partnership, but the announcement was enough to prompt a dip in shares at Impossible Foods’ rival Beyond Meat, which has itself developed co-branded frozen meals with online retailer Thrive Market.
'We view this test as a threat to Beyond Meat because it demonstrates the willingness of a big competitor to ‘margin down’ into co-branded private label products'
In a note to clients penned Friday, Credit Suisse analyst Robert Moskow argued that the deal represented a “threat” to Beyond Meat, which recently reported a sharp drop in margins.
“Kroger today said that it has entered into a partnership with Beyond Meat’s biggest competitor Impossible Burger to test a line of co-branded plant-based meat products with Kroger’s private label brands."
The test is "still in the early stages," claimed Moskow, "but it looks like it will be similar to the co-branding strategy that Costco’s Kirkland brand uses in the fresh meat case with big suppliers like Tyson.
“We view this test as a threat to Beyond Meat because it demonstrates the willingness of a big competitor to ‘margin down’ into co-branded private label products in order to maximize the reach of its products. This reinforces our Underperform thesis that competitive intensity, high development costs, and a negative shift in the channel mix to price-sensitive QSR customers will make it difficult for Beyond Meat to return to a break-even EBITDA margin structure.”
"Our brands [Kroger private label] is nearly $28 billion dollars in annual sales. This would make us the ninth largest CPG in the United States."
Stuart W. Aitken, chief merchandising and marketing officer, Kroger